Presentation of the TCTA Strategy for 2012 to 2013 Date: 8 May 2012 Time: 09:30 11
Agenda Overview Directives Expanded roles Budgets 2012/13 Financial transform Highlights empower
Overview 33
Purpose of TCTA TCTA is a Special Purpose Vehicle, established by DWA to raise off-budget funding for projects. The purpose of constructing works off-budget is two-fold: To ensure that the cost of the infrastructure is paid for by the benefiting end user and not by the entire tax base; To reduce the Government borrowing requirements
Vision & Mission Vision: To be a leader in sustainable supply of water in the region. 55 Mission: To facilitate water security through the planning, financing and implementation of bulk raw water infrastructure, in the most cost-effective manner that benefits water consumers
Strategic Objectives Deliver on all mandates provided by the Minister, in accordance with specifications and within the agreed timelines and budget Facilitate social transformation and build sustainable communities by providing jobs and empowerment Operate the business projects and processes in a cost-effective manner, conscious of the imperatives of PFMA 66
Strategic Objectives cont. Build the knowledge and capability of the organisation to generate lessons for project improvements, in pursuit of greater efficiencies in water delivery Ensure the continuous availability of highcalibre human capital for delivering on organisational mission into the future, while remaining a value-adding agile entity. 77
Products and Services Bulk raw water infrastructure Project design Project management Debt management Structuring and raising project finance Knowledge management Risk management Operation and maintenance Socio-economic transform transformation empower
Strategic Transformation Preferential Procurement Emphasis on women owned enterprises and local enterprises Enterprise Development Two contractors being developed per project to enable them to construct multi-disciplinary projects Local Employment Targets in contract to impose use of local employment 99 Skills development
Main Activities Lesotho Highlands Water Project Berg Water Project Vaal River Eastern Subsystem Augmentation Project Mooi-Mgeni Transfer Scheme Phase 2 Olifants River Water Resource Development Project Phase 2 Mokolo Crocodile Water Augmentation Project Phase 1 Komati Water Scheme Augmentation Project
Sector Challenges Institutional capacity constraints at both the national and municipal levels Uncertainty over Institutional Reform and Realignment process Weakness in the economic pricing of water, and in collecting water revenue Growth in water demand across competing sectors Long implementation lead-times in bringing new bulk infrastructure on-stream; High infrastructure backlog in water services
Directives
Vaal River Eastern Sub-system Augmentation Project (VRESAP)
VRESAP provides water to two key strategic industries: Sasol in Secunda Eskom Power Stations in Mpumalanga Province Vaal River Eastern Sub-system Augmentation Project 131 km. 1.9 m dia. pipeline and associated pumpstations Funding Borrowing limit: There is potential of a cash flow problem to complete the outstanding work prior to finalising the claims against the service providers Final costs expected within the approved capital budget of R2.7 bn Status Water delivery commenced in June 2009
Mooi-Mgeni Transfer Scheme: Phase 2 (MMTS-2)
Augment the Mooi-Mgeni system in KZN for water supply via Umgeni Water to ethekwini, umgungundlovu and Msunduzi Municipalities KZN economic hub Project comprises a dam in the Mooi River and the upgrade of the water conveyance system through a new pump station and 2nd pipeline Funding Mooi-Mgeni Transfer Scheme: Phase 2 Project budget estimated at R1.7 bn The cumulative expenditure to-date is at R346 million Status. The planned impoundment date: October 2012 Challenges
Komati Water Supply Augmentation Project (KWASAP) Matla Power Station
Komati Water Scheme Augmentation Project Augment the Komati System from the Vaal Eastern Sub-System with 57 million m³ pa to supply water to Eskom s Duvha and Matla power stations and later the new Kusile Power Station all in Mpumalanga Province Infrastructure includes a pump station next to Rietfontein weir and 68 km of pipeline Funding The KWSAP project budget is R 1 736 million and the cumulative expenditure to-date is at R463 million. The project is being implemented within budget Status: Water delivery by October 2012
Olifants River Water Resources Development Project: Phase 2 (ORWRDP) De Hoop Dam
Olifants River Water Resources Development Project: Phase 2 Main beneficiaries social needs (Government agenda to provide basic water services by 2014) water requirements for further mining developments. Funding: The Medium Term Expenditure Framework has confirmed an amount of R2.3bn for the project. The cumulative expenditure todate is at R181 million. For the remaining project components, the implementation plan will depend on the availability of funding (both on and off budget) 2020
Mokolo-Crocodile Water Augmentation Project (MCWAP)
Mokolo-Crocodile Water Augmentation Project Phase 1 Main beneficiaries Eskom s Medupi Power Station, Exxaro, Lephalale Local Municipality 46km pipeline and pump station & acquire existing infrastructure transfer water from Mokolo Dam 40 million m3/a Funding Status The MCWAP-1 project budget is R 2 139 million and the cumulative expenditure to-date is at R 361 million. The project is being implemented within budget. Environmental authorisation obtained Construction activities for MCWAP-1 have just commenced 2222 Water Delivery is expected in June 2013
Acid Mine Drainage Works-Phase 1 (AMD) Acid Mine drainage will cause the Vaal River System to go into deficit in 2014/15 if the salt load is not removed Directive is to implement the short term interventions in the 3 basins to: Prevent the Environmental Critical Level being breached and Serve as the first phase of the long-term solution which will ensure the salt load is removed from the system Directives received on the disposal of sludge and the discharge of treated AMD into the environment. Funding
Acid Mine Drainage Works-Phase 1 (AMD) Status The immediate solution (the rehabilitation of the Rand Uranium Plant), to prevent decant a far as possible and assist in the drawdown to environmental critical level is currently under construction The tender for the short term intervention is currently under evaluation Challenges Access to mining land and infrastructure with resulting transform implications empower on liabilities
Metsi Bophelo Borehole Project TCTA is currently implementing the MBBP in six provinces namely: Eastern Cape; Free State; Limpopo; Mpumalanga; North West; and KwaZulu Natal. The province of KwaZulu Natal was included in the programme in September 2011. The total project budget is R36.0million, with KwaZulu Natal being allocated R6.0 million.
Expanded Role
New Advisory Services TCTA increasingly uses its skills to provide advisory services to DWA, small water boards and local municipalities. (Examples of work to date): New contract between Bloemwater and Mangaung Local Municipality Water Resource Augmentation Options for Mbombela Local Municipality Tariff modelling for the Rehabilitation/replacement of the Vaal Gamagara Scheme Submitted a Proposal to DWA: TCTA response to the National Desalination Strategy. Approached by the Sisonke District Municipality for assistance in arranging funding for the proposed Bulwer- Donnybrook transform Water Supply empower Project. The matter is with
Budgets 2012/13 Click to edit Master subtitle style 2828 2828
Budget Overview 2012/13 The approved Budget has been based on the following strategic imperatives: ØIncreased activity on projects, as well as mandates received during the year (i.e. AMD); ØNew projects anticipated. 2929 ØIncreased capital expenditure and administrative costs, whilst headcount growth transform was limited, empower with only key roles being
At a glance Budget Components Budget 2012/13 R Million Capital Expenditure 3 644 Income (3 869) Directly Controllable Expenditure 264 Indirectly Controllable Expenditure 853 Finance Costs 2 543 3030
Budget Highlights 2012/13 Capital Expenditure Ø Ø The budget for 2012/13 was prepared based on the Long Term Cost Plans, Charter and expected timeline of the projects taking into account current project delays. BWP and VRESAP includes finalization of claims 3131
Budget Highlights 2012/13 Water income 3232
Budget Highlights 2012/13 Water Income Ø Water Income in LHWP budgeted in accordance with the agreement reached at the Annual Water Users Forum Tariff Review. Ø VRESAP income based on the Raw Water Supply Agreement entered into between TCTA, Sasol and Eskom. Ø BWP revenue based on the Addendum to Raw Water Supply Agreement entered into between TCTA and City of Cape Town. 3333
Budget Highlights 2012/13 Running Expenditure 3434 Ø Stable increase in Running Expenditure made up of Directly Controllable Expenditure (administrative & operating expenses) and Indirectly Controllable Expenditure (Royalties to the Government of Lesotho; amortisation of the enduring benefit; and Operating Costs of the LHWC and LHDA.
Budget Highlights 2012/13 Financing Costs 3535
Budget Highlights 2012/13 Financing Costs Ø Ø Ø 3636 Increased funding requirement as project activity increases Higher inflation rate forecasts impacting on the CPI amortisation for WS05. Inflation forecast from BER indicates increase of 5.4% Expected loss on switch auctions necessary to increase
37 Net Surplus of R198.72m Ø R267.70m higher than 2011/12 approved budget Budget 2012/13 In Summary Click to edit the outline text format Ø Driven by R427m higher water sales as MMTS2 and KWSAP start earning income; Second Outline Level Ø Partially offset by significant increases in royalties, directly controllable expenditure and marginally higher finance costs. Capital Expenditure R3 644.34m Third Outline Level Fourth Outline Level Fifth Outline Level Sixth Outline Ø R1.1bn higher than 2011/12 Budget as project activity increases Funding Requirement R3 465.76m Ø Marginally lower funding requirement as projects like KWSAP and MCWAP approach the end of construction. Most of capital expenditure
Medium Term Forecast - At a glance Budget 2011/12 Budget 2012/13 Budget 2013/14 Budget 2014/15 Capital Expenditure 2 464 3 644 3 371 2 990 Income ( 3 443) ( 3 869) ( 4 571) 5 115 Funding Costs 2 491 2 542 2 622 2 560 Running Expenditure 1 024 1 128 1 195 1 268 3838
Medium Term Forecast - Highlights Ø Revenue for the medium term has been budgeted for based on the income agreements. Ø Water sales for 2012/13 include the commencement of billing for KWSAP and MMTS2 3939 Ø Water sales on MCWAP commences in 2013/14
Medium Term Forecast - Highlights Ø Capital expenditure drops as projects are completed (KWSAP, MMTS2 and ORWRDP) as per the Long Term Cost Plan 4040
Medium Term Forecast - Highlights 4141
Medium Term Forecast - Highlights Ø Ø The main factors driving the increased finance charges are the higher interest rates and larger volume of funding. The medium term is expected to peak at R2.6 billion, and falls in 2014/15, as the newer projects are generally socially funded and do not increase the finance charges. 4242
Medium Term Forecast - Highlights Directly Controllable Expenditure Ø The increase in this expenditure in 2012/13 is based on business drivers, while the outer years are generally increased by National Treasury inflation guideline of 6.5% Indirectly Controllable Expenditure Ø Royalties increase due transform to the forecasted empower increase in 4343
Medium Term Forecast: 2012/13-2013/14 Summary Net Surplus Ø Increases from 2012/13 to 2014/15 due to significant increase in water sales as KWSAP, MMTS2 and MCWAP begin to earn water income; ØThis is only partially offset by increases in royalties and directly controllable expenses Capital Expenditure ØDecreases from 2012/13 to 2014/15, as projects near completion based on the Long Term Cost Plan. Funding Requirement ØDeclines as projected Capital Expenditure declines, and the mix of funding sources swings towards socially funded projects. Directly Controllable Expenditure Ø Increase on 2012/13 are inflationary. 4444
Financial Highlights 2012/13 Click to edit Master subtitle style 18 4545
Achieved Unqualified Audit Report. Independent Auditors Opinion Ø Audit Opinion: the financial statements present fairly, in all material respects, the financial position of the Trans-Caledon Tunnel Authority as at 31 March 2011, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Public Finance Management Act of South Africa. Ø Report on other legal and regulatory requirements: there were no material deficiencies identified during our audit that resulted in a modification of the auditors opinion on the financial statements and/or material findings on predetermined objectives and/or compliance with laws and regulations. 4646
Summary of Salient Elements Key elements in the financial statements for the year ended 31 March 2011 include: ØThe inclusion of the 2 new mandates received during the year (MCWAP and Borehole Project). ØThe early adoption of standards amendments to IFRS, including: 4747 Ø IAS 1 Presentation of financial statements (amended, effective 1 January 2011)
Summary of Salient Elements ØPrior period adjustments made to the 2010 financial year relate primarily to advance payments from DWA. ØSubsequent events include disclosure on the directive for AMD issued to TCTA on 6 April 2011. 4848
Prior Period Adjustments Prior period adjustments made to the 2010 financial year relate primarily to advance payments from DWA. Following directives received by TCTA on MCWAP, KWSAP and ORWRDP, TCTA was required to commence with work on these projects without having secured funding on the projects. Ø A Memorandum of Understanding was entered into between TCTA and DWA to establish a contractual agreement between DWA and TCTA which would enable DWA to pay TCTA an advance in order for TCTA to act on the directive received from the Minister. Ø In the case of ORWRDP and MCWAP, although invoices were issued to DWA, funds had not been received from DWA at year-end and in error; these invoices were not recorded in the general ledger. The prior period adjustment corrects this as it records both the Working Capital Advance (liability) and the debtor (being the invoice due by DWA). With regards to the KWSAP Memorandum of Understanding, Eskom was to advance funds to TCTA to meet the funding requirement regarding pre-directive engineering costs. Ø The invoices issued to Eskom had been paid and recorded as Revenue at year end in 2010. In 2011 when the MOU was actually signed, the terms of the agreement were properly assessed, 4949 which revealed that this in fact was an advance (as opposed to revenue) which TCTA has since
Statement of comprehensive income 50
Aggregated Statement of Financial Position 5151
Aggregated Statement of Financial Position Equities & Liabilities 2011 2010 Comments Reserves & Deficit (3 906) (3 930) Non Current Liabilities Long Term Financial Market Liabilities 23 620 22 307 R500m increase in nominal value of bonds switched. R172m CPI increase R235m increase from new WSP bonds issued R98m repayment of loans Other 335 342 Current Liabilities Trade & Other Payables 1 197 992 Short Term Financial Market Liabilities 2 332 4 778 Other 126 183 5252 Higher levels of borrowing in 2011 have resulted in higher accrued interest at 31 March 2011 compared to 2010 This is mainly due to the redemption of WS03 (R 2 585 million) in September 2010.
TCTA is a Going Concern The income agreements allow for a CPI adjusted increase on an annual basis as well as automatic triggers. Debt will be repaid over the planned repayment period and the organization is a going concern. The External Auditors have confirmed that TCTA is a going concern. 2010/11 Financial year Operating surplus of R2.3 billion Surplus of R44 million (after funding costs) 5353
Questions TCTA Thank you Telephone: (012) 683 1200 Website: http://www.tcta.co.za 5454